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The budget request also includes $50.9 billion for Overseas Contingency Operations (OCO), about $13.3 lower than the FY2015 enacted amount.

While the FY2016 budget request is essentially the same as that included in the FY2015 budget plan, DoD’s five-year budget plan for FY2016 to FY2020 is $15.5 billion higher than planned last year.

DoD’s press statement stressed that the budget “supports the 2014 Quadrennial Defense Review (QDR) strategy, beginning with its three pillars: protect the homeland, build security globally, and project power and win decisively.”

Introducing the FY2016 DoD budget at the Pentagon yesterday, Deputy Secretary of Defense Bob Work described the budget as strategy driven and resource informed. Noting that the request is $36 billion above the sequestration caps, Work pressed for congressional action to block the return to sequestration. He warned that a return to full sequestration will guarantee a “resource-driven, strategy-deprived budget.”

The QDR calls for rebalancing within the Army. The Army will lower its active end strength level to from 490,000 in 2015 to 450,000 by 2018. Army National Guard strength will drop from 350,200 in 2015 to 335,000 in 2017. DoD warns that if sequestration returns to full force the active Army will have to go down to 420,000.

The FY2016 budget provides significant funding for modernization programs. The budget funds procurement of 57 Joint Strike Fighters and 9 ships. Development funding is included for the KC-46 tanker and the Long Range Strike bomber. The Navy funds the overhaul of the George Washington and development of the Ohio replacement strategic submarine. And, the Army includes $4.5 billion for helicopter modernization.

The FY2016 budget would raise military pay by 1.3 percent. The budget also funds a 1.3 percent pay raise for civilians. The FY2015 pay raise was 1.0 percent. The 1.3 percent pay raise is a full percentage point below that which is called for in current law. Planned pay raises will also be limited in the FY2016-20 budget plan. The planned pay raises are 1.3 percent in 2017, 1.5 percent in 2018 and 2019, and 1.8 percent on 2020.

The budget also includes a number of proposals to slow growth in military compensation and benefits. The budget slows the growth in Basic Allowance for Housing (BAH) costs by 4 percent until the BAH rates equal 95 percent of housing and utilities costs.

Reduced commissary subsidies will come from operating efficiencies rather than a direct cut to the commissary subsidy, as proposed last year. Commissary operating days and hours will be reduced and the budget requests approval to include second destination transportation costs in the cost of goods.

The budget proposes to streamline the TRICARE options (Prime, Standard, and Extra) into a more simplified structure that includes in-network and out-of-network cost sharing. Active duty personnel will continue to be exempt from co-pays and fees. Modest enrollment fees would be implemented for new TRICARE-for Life Medicare-eligible retirees and pharmacy co-pays would be increased under the budget proposal.

The FY2016 DOD budget again requests congressional authority to conduct a new Base Realignment and Closure (BRAC) round to reduce excess infrastructure. Congress has repeatedly denied such requests in recent years.

The budget also renews other proposals that were rejected by the congress last year. The Air Force requests divestiture of the A-10 aircraft program to reallocate funds from supporting excess force structure to readiness needs. The Army requests, in its Aviation Restructure Initiative (ARI) to divest the oldest, least capable aircraft and retain more capable aircraft.

Additional detail (including Military Service briefings) on the FY2015 DoD budget request is available on the DoD Comptroller website.

President Obama will release the FY2016 federal budget to the public and the Congress on Tuesday Feb 2, 2013. This will be the first budget submitted by the Obama administration on the required date. Previous Obama budgets have been submitted one week to two months later due to late congressional action on the prior budget.

After the FY2016 budget is released on Tuesday, senior administration officials will brief the press and begin testifying before congressional oversight committees.

OMB Director Shaun Donovan is scheduled to testify on the FY2016 budget at the Senate Budget Committee (SBC) on February 3rd at 10:00am. He will appear before the House Budget Committee on February 4th at 10:30am.

Defense budget oversight committee hearings on the budget, normally held soon after the budget is released, will be delayed this year until after Ashton Carter is confirmed (as expected) as Secretary of Defense. Both the House (HASC) and Senate (SASC) Armed Services Committees leaders have said this delay will allow the committees more time to study the president’s proposals before the new secretary testifies.

SASC chairman Sen. John McCain (R-AZ) announced that the committee will hold a confirmation hearing on Carter’s nomination next week. While Carter will be grilled on the administration’s security policies, SASC approval and full Senate confirmation is expected to occur soon. In anticipation of a new secretary’s Senate confirmation, a farewell ceremony was held for outgoing secretary Chuck Hagel at Joint Base Myer-Henderson Hall, VA yesterday.

Next week, Defense Highlights will include a brief overview of the FY2016 DoD budget request and identify links to official statements and available budget material.

The Defense Business Board (DBB) has completed a study that demonstrates how the Department of Defense (DoD) can achieve savings of over $125 billion in the next five years through a series of productivity improvements. The study was directed by Deputy Secretary of Defense Bob Work.

The DBB report suggests that these savings could be used to help fulfill modernization plans or fund warfighter needs. Savings of $125 billion could fund operations for either 50 Army brigades, 10 Navy Carrier Strike Groups deployments, or 83 Air Force F-35 Fighter Wings, according to studies cited by the DBB.

In completing its work, the DBB interviewed more than 85 officials from private industry, DoD, and civilian experts in business process redesign and enterprise architecture. The panel also researched the best business practices with the private sector, academia, DOD, and other federal agencies.

The report leans heavily on the private sector assumption that productivity gains are driven by improvements in technology, processes, and innovation. The DBB points out that such productivity gains are considered “business as usual.”

The DBB identified recommendations for DoD productivity gains in four areas: 1) Contract Spend Optimization; 2) Labor Optimization; 3) IT Modernization; and 4) Business Process Re-engineering. Implementing these recommendations, according to the DBB, could achieve $75 to $150 in savings over the period 2016-20.

The bulk of the savings would come from contract optimization and labor optimization. The implementation of more vigorous vendor negotiations, gaining economies of scale, reducing contract fragmentation, increasing productivity in labor contracts and eliminating unneeded spending could achieve $46 to $89 billion over five years.

Optimizing the labor footprint by removing unnecessary or excess organization layers and increasing spans, reducing areas of complexity and redundancy, and optimizing the civilian-contractor mix could produce between $23 and $53 billion.

In addition, the DBB estimates that between $5 and $9 billion could be saved in Information Technology (IT) from application rationalization and consolidation, prioritizing requirements and eliminating programs with low return on investment (ROI), process redesign, and data center consolidation and cloud migration.

Successful implementation of best business practices starts with strong leadership and governance structure, the report asserts. This is best achieved by active and visible leadership at the highest level. Governance committees are led by senior leaders and functional leaders. The report stresses that priority accountability is the responsibility of all members and all efforts should be supported by the necessary budgetary resources and expertise.

The DBB asserts that “early mobilization” of these recommendations is the key to achieving these savings. “Every billion saved in 2016 is worth 5 billion [in] FY16-FY20 due to the compounding effect,” the briefing stresses.

Along with the importance of getting started on these recommendations now, the DBB cites several factors that are critical to the success its recommendations. Among these are: committed and visible leadership; a powerful vision statement; clear targets and metrics; implementing an early retirement program and incentives to retain critical talent; and organizational restructuring to create permanent efficiencies.

The final DBB report will include detailed discussion of the points made in the briefing parts.

In December, Congress approved and the president signed an Omnibus Appropriations bill that contained 11 of the 12 FY2015 appropriations bills. However, the Homeland Security Appropriations bill, which was subject to intense debate after the president announced executive action on immigration, was funded under a Continuing Resolution (CR) through February 27, 20175

The House action opens the bidding final action on what should prove to be difficult negotiations between the House and the Senate and the White House. The House bill includes two amendments that block the president’s action on immigration. This immediately brought a veto threat from the White House.

A Statement of Administration Policy (SAP) expressed support for the House-passed underlying FY2015 Homeland Security Appropriations bill, but strongly opposed the addition of the two immigration-related amendments. If the final bill includes these amendments, the SAP stated, the president’s senior advisors would recommend that the president veto the bill.

However to get to the president, the House bill would have to pass the Senate, which appears unlikely. Democrats, while in the minority, could still hold up the bill through a filibuster, which would require 60 votes to proceed on an up-or-down vote. But, the House bill is also problematic for some Senate Republicans. Several of them, including Sen. Lindsay Graham, have indicated that while they oppose the president’s actions on immigration, they are uncomfortable with forcing a showdown on Homeland Security funding over the issue. \

So, while House passage starts the process towards final action on the FY2015 Homeland Security bill, it will probably take much of the remaining time between now on February 27th to reach an agreement.

This means that the agencies funded in the bill (totaling about $40 billion), Secret Service, Customs and Border Protection, Immigration, Transportation Security Agency (TSA), Federal Emergency Management Agency (FEMA), and the Coast Guard will continue to operate under a CR.